Member Sign In

You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating indiv idual securities.

If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.

Volcano Reiterated at Neutral

We have reaffirmed our Neutral recommendation on Volcano Corporation with a target price of $28.00 following its third-quarter 2012 results. The company reported earnings per share (EPS) of 4 cents in the quarter, in-line with the Zacks Consensus Estimate. However, the result lagged the year-ago quarter’s EPS by a penny. Revenues for the quarter climbed9% year over year (up 12% at constant exchange rate or CER) to $93.7 million, but missed the Zacks Consensus Estimate of $95 million.

The San Diego, California-based company engages in the development, manufacture, and commercialization of a broad suite of precision guided therapy tools including intravascular ultrasound (“IVUS”) and fractional flow reserve (“FFR”) products. These products improve the efficiency of the percutaneous interventional (“PCI”) procedures in the coronary or peripheral arteries.

IVUS products have a significant contribution to the company’s revenues. Volcano Corporation witnessed mid-single-digit growth in IVUS disposable revenues in the U.S. However, revenue trends in Japan as well as in Southern Europe, particularly Spain, were not so encouraging. The company is expecting mid-single digit growth in IVUS disposables going ahead based on softness in PCI procedures in the U.S., price cuts in Japan, difficult economic conditions in Europe and its transition to a direct-sales force in Spain. Meanwhile, we favor the company’s strategy to drive growth based on market penetration, share gain and pricing growth with the introduction of more advanced IVUS catheters and related technology.

Volcano Corporation now maintains a strong portfolio due to the recent launch of several new products, which is expected to generate growth in the long term. In August 2012, the company’s Valet Micro catheter received the CE Mark approval followed by a limited market release in Europe. Volcano is expecting an early 2013 approval of Valet in Japan.

Pipeline development is also progressing. The next-generation IVUS technology called FACT (Focused Acoustic Computed Tomography) is slated for commercial launch in the U.S. and Europe in mid-2013 and in Japan a year later. Besides, a full market release for Volcano Corporation’s Eagle Eye Platinum catheter is expected in the fourth quarter of 2012. Moreover, within the Forward-Looking Intra-Cardiac Echo (FL.ICE) program, animal trials have been completed and management is on schedule for the first-in-man clinical work in 2013.

Volcano Corporation continues to expand its presence in Japan through direct sales programs or introduction of new products. The termination of several contracts in the past few years has made the company strengthen its position to address 100% of its business in Japan. The benefits of the transition to a direct sales force in Japan have encouraged the company to go direct in Spain as well.

The company, however, had to lower its outlook for fiscal 2012 to reflect the several headwinds currently at play. Due to the weak domestic PCI market and the transition to a direct sales model in Spain, the company now expects to report revenues of $380–$384 million (previous expectation $384–$390). Moreover, capital spending by customers like hospitals has been affected by the weak economic scenario. The company also faces tough competition from players such as Boston Scientific (BSX - Free Report) and St Jude Medical (STJ - Free Report) .

Our long-term Neutral recommendation is backed by a Zacks #3 Rank (Hold) in the short term.

Resources

Client Support

Follow Us

Zacks Research is Reported On:

Yahoo

MSN

Marketwatch

Nasdaq

Forbes

Investors.com

Morningstar

Zacks Investment Research is an A+ Rated BBB Accredited Business.

Copyright 2016 Zacks Investment Research

At the center of everything we do is a strong commitment to independent research and sharing its profitable discoveries with investors. This dedication to giving investors a trading advantage led to the creation of our proven Zacks Rank stock-rating system. Since 1988 it has nearly tripled the S&P 500 with an average gain of +26% per year. These returns cover a period from 1988-2015 and were examined and attested by Baker Tilly Virchow Krause, LLP, an independent accounting firm.

Visit performance for information about the performance numbers displayed above.